The Competition and Markets Authority has rejected calls for a review of the lettings industry market, including the fees charged by agents, saying there is no time.
Meanwhile, Citizens Advice has called on the Government to “enact a complete ban on any fees to tenants as soon as possible”.
In its response to the Fair Fees Forum which requested the review, the CMA said that it does not believe there is sufficient time, “given the speed with which the Government wishes to move on the fee ban”.
The response suggests that there is a timetable, but as of yesterday, we have been unable to find one.
The Government has so far only said that it will launch a consultation in March/April, meaning that it could be somewhere between imminent and six weeks away – with next Wednesday, March 29, the day when Article 50 is triggered, being the favourite among cynics.
Consultations should then normally last 12 weeks, according to the Government’s own guidelines.
Earlier this year the Fair Fees Forum – an industry initiative led by NALS – called on the CMA to conduct the review.
Yesterday, the Forum said it was disappointed that its request had been turned down.
It said: “The Forum strongly believes a CMA review would provide much-needed analysis on fees and charges and the wider operation of the market.
“Such impartial, independent analysis would help inform the legislation the Government intends to bring forward.”
However, the Forum said that the CMA had “left the door open”.
Forum chair Sheila Drew Smith said that the CMA could review the consultation when it was published, to “consider the potential for unintended consequences on competition”.
She said that the CMA had also agreed to take into account an evidence paper submitted by the Forum.
The Forum urged the Government to publish the consultation on its proposed ban “without delay”.
Isobel Thomson, chief executive of NALS, which acts as secretariat for the Forum, said: “Given the pivotal role played by the PRS, we feel this decision is a missed opportunity to review the way the sector works to deliver the best outcome for all concerned.
“However, it is clear from the CMA response that it feels there is not enough time for a review before the Government legislates.
“That being the case, the consultation must now be published in order to begin the process of discussions. We will come back to the CMA again once the consultation document is published.”
Citizens Advice said that the ban should be put into the statute books as soon as possible.
It said: “For every month the ban is delayed, renters pay in excess of £13m in unfair and uncompetitive fees.
“It also needs to be a complete ban, legislated using crystal-clear wording. This is the only way to ensure that tenants can understand and uphold their rights, and that breaches of the law are enforced.”
* Most landlords (71%) who use a letting agent will continue to do so even if they see their premiums rise following a ban on tenant fees.
Landlords are far more likely to stop using an agent if their own profits fall following tax changes, due to be phased in from next month. Almost half (47%) of landlords in that scenario would forego the services of a letting agent.
The research, from the National Landlords Association in conjunction with spin-off organisation the UK Association of Letting Agents, shows that eight in ten landlords (79%) think their letting agent will increase their fees as a result of the ban.
However, just 9% of landlords say they will part ways with their agent if their fees rise.
- 40% of landlords said they would increase rents to cover the cost
- 22% said they would look to shop around for a better deal
- 13% would attempt to negotiate or refuse to pay
- 9% would pay the additional fees
- 9% would leave their agent
- 7% were unsure
UKALA and the NLA actually did the research in the final quarter of last year, but re-released the results yesterday, as it upped the ante.
Looking at the above “survey” I wonder in a years time if the CAB, Shelter etc will look back at the fees ban (presuming it is in force by then) and realise that their actions have cost the people they claim to be looking after a shed load more rent, thus making them worse off.
No winner from a fee ban, apart from a temporary warm feeling for the do gooders.
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And what worth are the CAB?? Hapless bunch who dont normally offer advice but simply tell you to ring Shelter who are ultra biased towards tenants. Well, CAB – You best employ some more staff to deal with a tsunami of tenant complaints after a ban comes into effect – Because if they have not paid me a fee for a service, they will not recieve a service. Cant have it both ways.
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That I am afraid is a totally arrogant and unwarranted attack on the CAB and only fuels public oponion that agents are generally an uncaring bunch Whilst I might agree that they arent best qualified to understand the implications of the fees issue calling them a “hapless bunch” and “what worth are they ” when many of their staff and volunteers do admirable work and help the more vunerable in society is wide of the mark
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Well intentioned or otherwise if you dont understand something then it is at best foolish or worse reckless to interfere – CAB are out of order and regardless of whether they are volunteers or do admirable work elsewhere their naive left wing anti agent approach to tenant fees is actually going to do the public a disservice
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Well if you think agents are going to cultivate public opinion to support their fee structures by slagging of an agency who also does admirablele work in helping homeless and less advantaged people find accomodation you are mistaken Many tenants have been ripped as you are aware and if the middle groundof estate agency doesnt stand side by side and justify reasonable charges rather then make wide off the mark sweeping cheap shots certainly doesnt help the case
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I’m inclined to agree with Hillofwad71.
I don’t think many would disagree that agents have a very negative perception publically and politically. To then go into an extremely defensive/aggressive mode once organisations like the CAB get involved only serves to make your position worse.
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Surely your comment should read
“Agree with hillofwad i do,
Disagree agents should not, they have negative perception. Turn to dark side they must not, embrace the CAB if not will only serve to make your position worse”
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If landlords are having to cover the cost of tenant referencing then perhaps we need to look at 6 months rent as a deposit to manage our risks.
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Crikey – want them to wash your car while you’re at it?
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How can the CMA say there is no time to review, when the consultation hasn’t even started? Why can’t the consultation and CMA review happen concurrently?
Further, I rather suspect that this statement from CAB “For every month the ban is delayed, renters pay in excess of £13m in unfair and uncompetitive fees.” is basically refereing to all fees. In otherwrods all fees are “bad”, and that is simply not true.
If the Government can u-turn on the NIC decision for the self-employed, they can do the same with this decision, especially as they won’t have the extra NI contributions going into the treasury, they’ll need all the cash they can get!
On the basis that within the £13m per month there is 20% VAT, then that is circa £130M PA they are missing out on.
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I still think a tenant paying towards a contract or an inventory for instance or even towards registration of their deposit are services that protect their interest as well as the landlords.
Why shouldnt they pay a fee towards these services? I think it’s fair, it is however the greedy agents that exist that have caused for so much uproar and I still feel a cap rather than a complete ban is the only fair way to help prevent a disaster in this sector. A complete ban surely can only end one way and is very short sighted of these so called organisations that are not really thinking about the likely implications of their protests. Only my opinion of course.
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aaron, nicely put
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Theresa May on Brexit – “No deal is better than a bad deal” rather than rush this through I’d suggest the government are consistent in their approach – prioritising getting it RIGHT over getting it done!
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Yeah, whats the need for the rush & we won’t talk considering fees have been around for decades. Sounds more like I’m going to do what I like, as and when I feel like it.
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* Most landlords (71%) who use a letting agent will continue to do so even if they see their premiums rise following a ban on tenant fees.
However, just 9% of landlords say they will part ways with their agent if their fees rise.
mmmmmmmmmm
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Rents will rise to reflect irrecoverable landlord’s costs; Letting services quality will fall. Basic economic theory.
In order to reduce fees cost, landlords will limit the scope of instruction to Letting Agents. For example:
1) To reduce the risk of abortive Referencing costs, the initial filtering of tenant applicants will be tightened up to remove all those judged ‘marginal’ or ‘fail’.
2) Letting Agents will be told to spend less time on the admin and communications with tenants, told to minimise the offering and standardise processes with templates – ‘take it or leave it’.
3) Cheaper shorter and less thorough Inventories will be commissioned, or untrained landlords will do it themselves, which will always be to tenants’ disbenefit.
Landlords may simply not appoint a Letting Agent at all, so those without training will be less knowledgeable people handling the process, giving poorer service and with a much higher risk of omissions and mistakes.
Thus, the very people that the new Ban is aiming to protect will be harmed.
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Some good points Mr Serious but item 3 will only work to the landlord’s DISadvantage in that a sloppy inventory will be thrown out by the judge if the tenant takes it to arbitration (as we have found on occasion to our cost!).
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As agents, if you’re taking a cut of the collected rent, then realistically the amount you deduct should be sufficient to cover your costs and allow for your profit. If that fails to do so, then therein lies your problem.
Insurance brokers, for example, carry out work without charging a fee to either insured or insurer – they set up policies, have to scout markets, prepare renewals, and most time-consuming of all, have to deal with claims, all without charging for any of it. This involves a lot of work, and a lot of man hours. Yet, they don’t charge any fees – All they do is take a slice of the premium each month – for the majority of policies, this isn’t going to be a particularly substantive amount, but most brokerages seem to make a reasonable profit… I’m inclined to say that agents should be working in the same way.
But that’s just my two cents…
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hornytoad63
id be inclined to agree with you but landlords are negotiating agents monthly fees down. In 2012 I was charging 13%+vat for management. Now I’m lucky to get 10% without them escorting me off the premises. Landlords look to pay less now this is the trouble.
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GREAT. ….. Bits such as the tenant fee ban and legislation in respect of BTL mortgage offset to reduce and reduce. SDT on second+ properties.
Me thinks the market is to shift back to a sales agents market as we knew late 1980’s and mid 1990’s
Time for letting agents to learn sales. The next 2 years will sculpt a very different market place.
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How left wing can this Tory government actually get, May models herself on Margaret Thatcher, well let me tell you Thatcher would never have implement such an anti-business anti-free market policy. How far left can she go in order to win the left vote, she has absolutely no principles these are not Conservative values. So the policy choice is now Communism under comrade Corbyn or Labour under May.
So a ban on tenant fees, and what if they decide not pay the rent on time, no late payment charges, so the agent gets the run around and has to chase the non-paying tenant without any penalty, brilliant, fantastic idea, It wasn’t the tenants fault that they couldn’t afford to pay the rent, as they had just booked a holiday to Mallorca and with Christmas coming they had presents to pay, so they thought they would take a free no cost loan from the Bank of Landlord.
Get in the real world Mrs May, a petition of 500,000 tenants to not pay fees, that is like turkeys not voting for Christmas, whatever next. What you are really saying is Letting Agents don’t deserve to make a profit and Landlord’s are single handedly causing the “housing crisis”. So lets penalise them for their evils.
Don’t expect anymore contributions to the Tory Party from me and you can cancel my membership when it is due.
Rant over
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In most markets, the principle is that buyers/consumers can decide not to buy a product or service if they don’t like the terms or think the costs are too high. With housing, people don’t realy have a choice. People have to have homes – there’s no way of tenants realistically choosing not to use the service. So, it’s a ‘captive market’ – easy for exploitation, which is what many people believe is exactly what was happening thanks to many agents charging excessive fees. As such, it’s not unexpected or entirely unreasonable for the Government to intervene more. It’s as much consumer protection, as anything.
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Surely that is a case for a fair fee cap rather than a ridiculous ban.
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Arguably, yes. Arguably, however, it could also be seen as a deserved punishment for the years of perceived exploitation. (Not necessarily my view – but it’s one way of looking at it).
Like outlined above, the primary source of your income should be your cut of the rent – both to cover costs and allow for profit. Additional fees often come across as agents wanting a ‘second bite of the cherry’, trying to claim money for work which should already be covered by the money made from rent.
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This is not a political movement.
This is just stopping agents overcharging because they have inefficient admin systems.
Modernise or fail, over to you…
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observer
how does one modernise good service, agents still have to do viewings, how do they get to viewings? Cars? Who pays for the fuel, car allowance, running costs? Insurances etc….. the list goes on. You can run open house events to manage time and expenditure wisely but the outright fee ban is a travesty and has a ripple effect that will be to the detriment of the very people it’s put in place to help.
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A lot of well intentioned but somewhat knee jerk reaction to this prickly subject and as always the industry is in danger of shooting itself in the foot.
If there was complete transparency in the ( soon to be regulated??) referencing system that showed the prospective tenant the actual cost of obtaining the references( thirds party charges) plus the admin charge to do it by the letting agent – say a nominal £50 plus VAT it may help and be acceptable to the regulator? .After all in a well run office how long does it actually take to deal with it? I fear though the fees will become banned.
The trouble is that many agents have allowed the referencing income stream to be a major profit centre thus allowing them to not negotiate with landlords a cost effective management percentage fee. Also as always it is the few that taint the milk for the remainder. Some referencing fees and particularly joint fees are absolutely absurd.
While well intentioned charities like the CAB etc appear to prefer representing the tenant how many agents go to the CAB to put their side and explain why the charges are made?
We may point a finger at the tenant for the hassle they put letting agents to but with every one finger pointing forward there are three pointing back at us.
Plan your business ahead for no referencing fees coming in via the traditional route.
Also put on your thinking hats for another way to legally assist would be tenants for a fee. After all a tenant without having been vetted won’t get anywhere to live
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